MSCI Adds Faysal Bank to Frontier Market Index in August 2025 Review
August 8, 2025 –
Global index provider MSCI has announced the results of its August 2025 Index Review, bringing Pakistan-based Faysal Bank Limited (FABL) into the MSCI Frontier Markets Index. This inclusion raises the total number of Pakistani constituents in the index to 27, up from 26.
The changes will take effect after the market close on August 26, 2025, according to Topline Securities.
Higher Market Cap Thresholds in This Review
As per MSCI’s updated criteria, the minimum free float market capitalization for selection was set at USD 90 million, and the total market cap at USD 181 million—both thresholds marking a 15–17% increase from the May 2025 review. These adjustments align with the broader performance trend of frontier markets globally.
Pakistan Market Outperforms Regional Peers
Since the last MSCI review, Pakistan’s stock market has delivered impressive results, outperforming the MSCI Frontier Markets Index. Over May, June, and July 2025, Pakistan posted a 24% total USD return, compared to 20.4% for the broader frontier index.
Retention of Non-Qualifying Stocks Under Buffer Rule
Despite not meeting the updated free float requirement, three Pakistani stocks—LIP (USD 87 million), ABOT (USD 181 million), and SEARL (USD 86 million)—remain in the index. This decision falls under MSCI’s buffer rule, which allows for temporary retention to avoid excessive index turnover.
However, Topline Securities cautions that past examples—such as TRG Pakistan—show that non-compliant stocks may still be removed in future index reviews.
Pakistan’s Weight and Expected Inflows
Following the inclusion of FABL, Pakistan’s total weight in the MSCI Frontier Markets Index is estimated at 6.0–6.5%. The weight of FABL alone is expected to contribute an additional 8 basis points (bps).
Based on the assumption that USD 2–3 billion in assets globally track the frontier market index, estimated foreign inflows into FABL could range between USD 1.5 million to USD 2.3 million. However, as Pakistan is currently not included in any major passive fund, actual market activity may remain limited.
Changes in MSCI Small Cap Index
In its MSCI Small Cap Index, the review brought two additions from Pakistan:
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Indus Dyeing (IDYM)
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Jubilee General Insurance (JGICL)
At the same time, two stocks were removed:
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Habib Sugar Mills (HABSM)
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Octopus Digital (OCTOPUS)
Conclusion
The latest MSCI review signals a positive development for Pakistan’s capital markets, showcasing improved investor confidence and strong market performance. While inflows may be modest due to passive fund exclusions, the inclusion of Faysal Bank and other reshuffling highlight the country’s growing relevance in global frontier markets.
